NOTE 2. BUSINESS COMBINATIONS

On June 7, 2018 (the “acquisition date”), our Company acquired 100% ownership interest in BDM and ASCO. Our Company also acquired in this transaction a wholly-owned subsidiary of ASCO, Canal Re S.A., a reinsurance company licensed under the laws of the Grand Duchy of Luxembourg (“Canal Re”). The acquisition of all three of these entities will be referred to as (the “Acquisition”). The Acquisition was undertaken as part of our Company’s strategy of expanding to more brokers and insureds across Europe and reinforces our Company’s presence in the European Union’s single market. We anticipate that this will enable our Company to better serve its European clients after Brexit, and will also provide an opportunity for BDM and ASCO to reach a wider European audience.

Our Company paid a purchase price of EUR 35.0 million in cash at the acquisition date (which was approximately $40.5 million based on the exchange rate as of June 30, 2018). Additionally, our Company will be reimbursed up to EUR 5.0 million (which is approximately $5.8 million based on the exchange rate as of June 30, 2018) in the event of adverse development of claims incurred prior to December 31, 2016 as measured on December 31, 2019. This reimbursement was valued at $nil as of the acquisition date and June 30, 2018.

The purchase price was allocated to the assets acquired and liabilities assumed of BDM and ASCO based on estimated fair values as of the acquisition date and our Company recognized goodwill of $11.3 million.

Our Company identified finite lived intangible assets of $7.9 million, including customer relationships, the value of business acquired (“VOBA”), broker networks and trade name. These finite lived intangible assets will be amortized over a weighted average period of 12 years.

Our Company identified indefinite lived intangible assets of $2.5 million, related to ASCO’s European licenses.

The fair value of the assets acquired and liabilities assumed and the allocation of the purchase price on the acquisition date are summarized in the table below:

amounts in thousands	June 30, 2018
Consideration paid	$	40,492

Assets
Investments		45,182
Cash and Cash Equivalents		18,109
Prepaid Reinsurance Premiums		2,701
Reinsurance Recoverables on Paid Losses		1,311
Reinsurance Recoverables on Unpaid Losses and LAE		15,769
Other Assets		19,943

Fair Value of Identifiable Intangible Assets		10,391

Total Assets Acquired	$	113,406

Liabilities
Reserves for Losses and LAE		31,928
Unearned Premiums		11,139
Deferred Income Tax		8,947
Accounts Payable and Other Liabilities		32,212
Total Liabilities Assumed	$	84,226

Goodwill	$	11,312

Significant Fair Value Adjustments were as follows:

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Fair Value of Finite and Indefinite-Lived Intangibles – To establish the fair value of identifiable intangible assets related to customer relationships, licenses, value of business acquired, broker networks and trade name.

•

Fair Value of Property – To adjust the carrying value of real estate property to reflect fair value.

•

Fair Value of Software – To establish the fair value of internal use software systems.

•

Deferred Income Tax – To reflect the deferred tax impact on the fair value adjustments.

•

Goodwill – To establish the fair value of goodwill related to the Acquisition.

The business combination accounting is subject to change if additional information that existed as of the balance sheet date, but was not available, later becomes available within the measurement period, which cannot exceed twelve months from the acquisition date. The acquisition date fair values of the assets acquired and liabilities assumed, including Reserves for Losses and LAE, Deferred Income Tax and Identifiable Intangible Assets, as well as the related estimated useful lives, are provisional and may be subject to adjustments, which may impact the amounts recorded for assets acquired and liabilities assumed as well as the goodwill.

The amount of revenue and earnings of BDM and ASCO since the acquisition date has been immaterial.